UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
MEMORIAL HOSPITAL OF SOUTH BEND, et al.,
Plaintiffs, v. Civil Action No. 20-3461 (JEB) XAVIER BECERRA, Secretary of Health and Human Services,
Defendant.
MEMORANDUM OPINION
In 2009, Plaintiffs Memorial Hospital of South Bend and Union Hospital appealed to the
Department of Health and Human Services’ Provider Reimbursement Review Board (PRRB) a
determination by the Centers for Medicare and Medicaid Services (CMS) regarding the formula
for the hospitals’ Medicare reimbursement. When the PRRB sua sponte dismissed the appeal for
jurisdictional reasons, they brought suit here. The parties have now cross-moved for summary
judgment on the appropriateness of the jurisdictional dismissal. As the Court ultimately agrees
with Defendant and upholds the PRRB’s decision, it will address only the jurisdictional
determination and not reach the substantive reimbursement claim that formed the basis of
Plaintiffs’ appeal.
I. Background
A. Factual Background
Although this Opinion will not delve into the underlying merits and the reader need not
commit to memory the specific reimbursement methodology, a brief detour into how healthcare
1 providers are paid under the Medicare Program is nonetheless valuable for understanding why
this case arose and the PRRB’s jurisdictional decision. CMS, a part of HHS, operates the
provider-reimbursement system for Medicare patients. See ECF No. 14 (Pls. MSJ) at 2; ECF
No. 16 (Def. Cross-MSJ) at 2–4. CMS, in turn, works with “Medicare Administrative
Contractors” or “MACs,” which are private insurance companies or other entities that compute
the specific reimbursement amount each provider is to receive annually. To calculate that
amount, a provider must file a cost report with its MAC at the end of each fiscal year, which the
MAC then reviews. See 42 C.F.R. § 405.1801(b). After such review, the MAC must within a
year “furnish the provider and other parties as appropriate . . . a written notice reflecting the
contractor’s final determination of the total amount of reimbursement due the provider” for that
fiscal year. Id. § 405.1803(a); id. § 405.1835(c)(1) (laying out time requirements). This is
known as a Notice of Program Reimbursement (NPR). See Pls. MSJ at 9.
Providers’ reimbursements for providing acute inpatient care under Medicare Part A,
which “covers inpatient hospital expenses and other institutional health care costs for certain
individuals aged 65 years old and older, as well as certain individuals with disabilities,” are
based on a Prospective Payment System (PPS). See Def. Cross-MSJ at 2; 42 U.S.C. § 1395c et
seq. Under the PPS model, hospitals receive a predetermined rate according to the diagnosis-
related group into which each patient’s condition is classified, but they may also receive payment
adjustments based on certain characteristics of their facilities. See Pls. MSJ at 3; Def. Cross-
MSJ at 3. One such adjustment is the “disproportionate share hospital” (DSH) adjustment,
which provides a bump-up in payment to hospitals that “serve[] a significantly disproportionate
number of low-income patients,” since treating this group frequently incurs higher costs. See 42
U.S.C. § 1395ww(d)(5)(F)(i)(I). Whether a hospital is eligible for the DSH adjustment is
2 determined based on its “disproportionate patient percentage,” which is calculated through the
sum of two fractions set out in 42 U.S.C. § 1395ww(d)(5)(F)(vi). These fractions, which help
determine the share of low-income Medicare and non-Medicare patients treated by a hospital, are
the Medicare-Supplemental Security Income (SSI) Fraction and the Medicaid Fraction. These
are best represented through their respective equations:
Medicare-SSI Fraction = Inpatient Days for Patients Entitled to Both Medicare Part A and SSI ----------------------------------------------------------------------------------- Inpatient Days for Patients Entitled to Medicare Part A
Medicaid Fraction = Inpatient Days for Patients Eligible for Medicaid but Not Medicare Part A ----------------------------------------------------------------------------------------- Total Patient Days
See Pls. MSJ at 5; Def. Cross-MSJ at 3–4; 42 U.S.C. § 1395ww(d)(5)(F)(vi)(I)–(II).
If that were not technical enough, the substantive dispute that led to this case revolves
around where to place days from a different category of Medicare coverage — Medicare Part C.
Part C, also known as Medicare Advantage, allows individuals eligible for Medicare to “enroll in
private health insurance plans.” Pls. MSJ at 2. The placement of Medicare-Part-C days has been
the subject of considerable litigation because “if Part C beneficiaries are included in the
Medicaid fraction rather than the Medicare fraction, the hospitals receive a great deal more
compensation.” Allina Health Servs. v. Sebelius (Allina I), 746 F.3d 1102, 1105 (D.C. Cir.
2014). This result arises from the fact that relatively few individuals are entitled to both
Medicare Part C and SSI. When Medicare-Part-C days are added to the Medicare-SSI fraction,
the numerator thus does not expand nearly as much as the denominator does, with the
denominator becoming the sum of inpatient days for patients entitled to Medicare Part A and
Part C. Ne. Hosp. Corp. v. Sebelius, 657 F.3d 1, 5 (D.C. Cir. 2011). This cuts down the
hospitals’ potential DSH adjustment in a way that including Medicare-Part-C days in the
3 Medicaid fraction would not, since the denominator of that fraction already includes all patient
days.
Significant for our case, on June 24, 2009, CMS published Medicare-SSI fractions “for
every hospital in the country, including the Plaintiff Hospitals, for cost years beginning in
Federal Fiscal Year 2007,” and it included Medicare-Part-C days in those fractions. See Pls.
MSJ at 10; see also ECF No. 24 (Joint Appendix) at 87–88 (listing fractions). Unsurprisingly,
Plaintiffs were displeased by this publication, as they contend that Part C days “should not be
included in either the numerator or denominator of the” Medicare-SSI fraction because
Medicare-Part-C patients are not entitled to benefits under Medicare Part A. See J.A. at 2.
Dissatisfied providers can seek relief through the PRRB and they may cite several bases.
First, a provider can appeal if it is “dissatisfied with a final determination of . . . [its MAC] . . . as
to the amount of total program reimbursement due the provider.” 42 U.S.C.
§ 1395oo(a)(1)(A)(i). Second, and at issue in this case, a provider can file before the PRRB if it
is “dissatisfied with a final determination of the Secretary as to the amount of the payment under
subsection (b) or (d) of section 1395ww,” which includes the DSH adjustment. Id.
§ 1395oo(a)(1)(A)(ii). Third, a provider may also appeal if it does not receive an NPR within a
year of filing its cost report with its MAC. Id., § 1395oo(a)(1)(B); 42 C.F.R. § 405.1835(c)(1).
Providers may bring their appeals individually or in a group, as was done here. See J.A. at 1. In
a group appeal, the amount in controversy must be $50,000 or more in the aggregate. See 42
U.S.C. § 1395oo(b); 42 C.F.R. § 405.1837. The appeal must also be filed within 180 days after
“notice of the intermediary’s final determination,” “notice of the Secretary’s final
determination,” or when an NPR would have been timely received depending on the basis for the
appeal. See 42 U.S.C. § 1395oo(a)(3). A decision of the PRRB is final unless it is reversed,
4 affirmed, or modified by the HHS Secretary within 60 days of the date the provider receives
notice of the Board’s decision. Id. § 1395oo(f)(1). Providers then “have the right to obtain
judicial review of any final decision of the Board.” Id.
B. Procedural Background
On December 18, 2009, seven hospitals filed an appeal before the PRRB challenging the
Medicare-SSI ratios published by CMS on June 24, 2009. The PRRB acknowledged the filing of
the appeal on December 24, 2009. See J.A. 71. In 2019, still waiting for a decision, five of the
hospitals withdrew, id. at 5, but the two Plaintiffs — Memorial Hospital of South Bend and
Union Hospital — remained. After sitting on Plaintiffs’ appeal for nearly eleven years, the
PRRB finally ruled on September 29, 2020, dismissing it for lack of jurisdiction on the ground
that the June 2009 Medicare-SSI fractions were not a “final determination of the Secretary as to
the amount of the payment” or any other final determination that could be the basis for an appeal.
Plaintiffs sought review of the PRRB’s decision in this Court in November 2020. See ECF No. 1
(Complaint).
II. Standard of Review
Both parties here have moved for summary judgment on the administrative record. See
Pls. MSJ at 1; Def. Cross-MSJ at 25. Although brought as summary-judgment motions, the
standard set forth in Federal Rule of Civil Procedure 56(c) does not apply to these claims
because of the limited role of a court in reviewing the administrative record. See Sierra Club v.
Mainella, 459 F. Supp. 2d 76, 89–90 (D.D.C. 2006); see also Bloch v. Powell, 227 F. Supp. 2d
25, 30 (D.D.C. 2002), aff’d, 348 F.3d 1060 (D.C. Cir. 2003). “[T]he function of the district court
is to determine whether or not as a matter of law the evidence in the administrative record
permitted the agency to make the decision it did.” Sierra Club, 459 F. Supp. 2d. at 90 (quotation
5 marks and citations omitted). “Summary judgment is the proper mechanism for deciding, as a
matter of law, whether an agency action is supported by the administrative record and consistent
with the APA standard of review.” Loma Linda Univ. Med. Ctr. v. Sebelius, 684 F. Supp. 2d 42,
52 (D.D.C. 2010) (citation omitted), aff’d, 408 Fed. App’x 383 (D.C. Cir. 2010).
Here, because Plaintiffs “challenge[] the PRRB’s determination that it lacks jurisdiction
over an issue,” the Court’s summary-judgment review must be “‘limit[ed] . . . to the PRRB’s
jurisdiction determination’ and not reach the merits of the claim.” Clarian Health W., LLC v.
Burwell, 206 F. Supp. 3d 393, 405 n.13 (D.D.C. 2016), rev’d and remanded sub nom. Clarian
Health W., LLC v. Hargan, 878 F.3d 346 (D.C. Cir. 2017) (quoting Eagle Healthcare, Inc. v.
Sebelius, 969 F. Supp. 2d 38, 45 (D.D.C. 2013)); see also Good Samaritan Hosp. Reg’l Med. Ctr.
v. Shalala, 85 F.3d 1057, 1062 (2d Cir. 1996) (“[B]ecause the only final decision reached by the
PRRB was that it lacked jurisdiction to review Empire’s reopening denials, the district court was
limited to reviewing this decision and did not have jurisdiction to review the merits of Empire’s
reopening decisions.”). In other words, the Court will not address the ratios themselves; rather, it
will examine only whether the PRRB’s jurisdictional determination satisfies the judicial-review
provisions of the APA, 5 U.S.C. § 706, which are incorporated into the Medicare statute. See 42
U.S.C. § 1395oo(f)(1).
The Court ultimately must “hold unlawful and set aside” the PRRB’s decision if it is
“arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” 5 U.S.C.
§ 706(2). Under this “narrow” standard of review, “a court is not to substitute its judgment for
that of the agency.” Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co.,
463 U.S. 29, 43 (1983). Rather, courts “will defer to the [agency’s] interpretation of what [a
statute] requires so long as it is ‘rational and supported by the record.’” Oceana, Inc. v. Locke,
6 670 F.3d 1238, 1240 (D.C. Cir. 2011) (quoting C & W Fishing Co. v. Fox, 931 F.2d 1556, 1562
(D.C. Cir. 1994)).
An agency must “examine the relevant data and articulate a satisfactory explanation for
its action.” State Farm, 463 U.S. at 43. For that reason, courts “‘do not defer to the agency’s
conclusory or unsupported suppositions,’” United Techs. Corp. v. U.S. Dep’t of Def., 601 F.3d
557, 563 (D.C. Cir. 2010) (quoting McDonnell Douglas Corp. v. U.S. Dep’t of the Air Force,
375 F.3d 1182, 1187 (D.C. Cir. 2004)), and “agency ‘litigating positions’ are not entitled to
deference when they are merely [agency] counsel’s ‘post hoc rationalizations’ for agency action,
advanced for the first time in the reviewing court.” Martin v. Occupational Safety & Health
Review Comm’n, 499 U.S. 144, 156 (1991). The reviewing court thus “may not supply a
reasoned basis for the agency’s action that the agency itself has not given.” Bowman Transp.,
Inc. v. Arkansas-Best Freight System, Inc., 419 U.S. 281, 285–86 (1974) (citation omitted). A
decision that is not fully explained may, nevertheless, be upheld “if the agency’s path may
reasonably be discerned.” Id. at 286.
When reviewing an agency’s interpretation of a law it administers, a court must apply the
principles of Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837
(1984); Se. Ala. Med. Ctr. v. Sebelius, 572 F.3d 912, 916 (D.C. Cir. 2009). Under Chevron, the
first step is to “examine the statute de novo, ‘employing traditional tools of statutory
construction.’” National Ass’n of Clean Air Agencies v. EPA, 489 F.3d 1221, 1228 (D.C. Cir.
2007) (quoting Chevron, 467 U.S. at 843 n.9); see also Mount Royal Joint Venture v.
Kempthorne, 477 F.3d 745, 754 (D.C. Cir. 2007) (court begins by “applying customary rules of
statutory interpretation”). “If the intent of Congress is clear, that is the end of the matter; for the
court, as well as the agency, must give effect to the unambiguously expressed intent of
7 Congress.” Chevron, 467 U.S. at 842–43; see also Eagle Broadcasting Group, Ltd. v. FCC, 563
F.3d 543, 552 (D.C. Cir. 2009) (if the “search for the plain meaning of the statute . . . yields a
clear result, then Congress has expressed its intention as to the question, and deference is not
appropriate”) (internal citation and quotations omitted); Arkansas Dairy Co-op Ass’n, Inc. v.
U.S. Dep’t of Agr., 573 F.3d 815, 829 (D.C. Cir. 2009) (no deference due where agency’s
construction is “contrary to clear congressional intent”).
If, however, “the statute is silent or ambiguous with respect to the specific issue,”
Chevron, 467 U.S. at 843, the analysis proceeds to “determine the deference, if any, [the court]
owe[s] the agency’s interpretation of the statute.” Mount Royal Joint Venture, 477 F.3d at 754.
Under this step, “[i]f Congress has explicitly left a gap for the agency to fill, there is an express
delegation of authority to the agency to elucidate a specific provision of the statute by regulation.
Such legislative regulations are given controlling weight unless they are arbitrary, capricious, or
manifestly contrary to the statute.” Chevron, 467 U.S. at 843–44. Where a “legislative
delegation to an agency on a particular question is implicit rather than explicit,” id. at 844, a
court must uphold any “‘reasonable interpretation made by the administrator’ of that agency.”
Am. Paper Inst., Inc. v. EPA, 996 F.2d 346, 356 (D.C. Cir. 1993) (quoting Chevron, 467 U.S. at
844).
III. Analysis
In reviewing the PRRB’s dismissal for lack of jurisdiction, this Court must answer a
straightforward question: was the publication of Medicare-SSI fractions by CMS on June 24,
2009, a “final determination of the Secretary as to the amount of the payment” to be received? If
so, then the PRRB did have jurisdiction and erred in its dismissal; if not, its decision was correct.
The PRRB relied on two reasons. First, as it explained, the publication of the Medicare-SSI
8 fractions “cannot be considered a final determination as CMS immediately rescinded those
percentages and the action to rescind occurred well before this appeal being filed.” J.A. at 3.
Those fractions were thus never actually used to calculate Plaintiffs’ DSH adjustment. Id.
Second, CMS’s publication was only “provid[ing] updated data for determining the
disproportionate share adjustment for IPPS [Inpatient Prospective Payment System] hospitals . . .
and, as such, was not itself a final determination.” Id. (internal quotation marks and citations
omitted).
The Government maintains that the Board’s dismissal should be affirmed as it was based
on “the correct interpretation of the Medicare statue” under either Chevron Step One or Step
Two, and that the decision was not arbitrary and capricious. See Def. Cross-MSJ at 9. Plaintiffs
counter that the published Medicare-SSI fractions did provide them with a final decision on
payment amounts since those fractions had to be used in calculating their disproportionate
patient percentage, which in turn affects the amount of their DSH adjustment and ultimate
payment. See Pls. MSJ at 18. This Opinion will begin with an analysis under Step One of
Chevron before proceeding briefly to Step Two and the other issues remaining in the case.
A. Chevron Step One
The Chevron analysis first “requires the court to consider ‘whether Congress has spoken
to the precise question at issue.’” Affinity Healthcare Servs., Inc. v. Sebelius, 746 F. Supp. 2d
106, 114 (D.D.C. 2010) (quoting Chevron, 467 U.S. at 842). It is clear from the text of the
statute and traditional tools of statutory interpretation that the June 2009 Medicare-SSI fractions
are not within the scope of decisions Congress intended for § 1395oo(a)(1)(A)(ii) to cover, as the
fractions are neither final nor a determination as to the amount of payment for the reasons
described below.
9 1. Final Determination
Although there is not a subsection of the Medicare statute explicitly defining what
constitutes “a final determination of the Secretary as to the amount of the payment” under 42
U.S.C. § 1395oo(a)(1)(A)(ii), both the PRRB and the Government argue that the Medicare-SSI
fractions at issue could not possibly be considered “final” because CMS rescinded them shortly
after publication. Indeed, CMS announced updated Medicare-SSI data on July 24, 2009, the
very next month. See ECF No. 19 (Pls. Reply); CMS, CMS Pub. 100-04 Claims Processing
(July 24, 2009), https://go.cms.gov/3J2CInD. Then, one week later, MACs were told “not to
issue final settlements for the fiscal year 2007 using the 2007 SSI ratios.” J.A. at 2; Pls. Reply at
3. The June 2009 fractions had thus already been rescinded well before Plaintiffs brought their
case to the PRRB that December. See Def. Cross-MSJ at 10. The process for calculating the
Medicare-SSI fractions, moreover, was revised yet again a year later when CMS released an
administrative ruling and proposed rule laying out changes to the process for matching data in
calculating the Medicare-SSI fractions. See CMS, CMS Ruling 1498-R, 2010 WL 3492477
(Apr. 28, 2010), 6–7; 75 Fed. Reg. 23,852 (May 4, 2010); see also J.A. at 2. Finally, as the
PRRB and Defendant explain, “On March 16, 2012, CMS posted revised SSI percentages on the
website,” and those were the fractions that were ultimately used in the calculations of Plaintiffs’
payments. See J.A. at 3; Def. Cross-MSJ at 10. Plaintiffs do not dispute that revised Medicare-
SSI ratios were published in March 2012 and used in the relevant NPRs for their hospitals, which
were published in November 2012. See Pls. Reply at 3, 13.
Defendant thus argues that given this history of revision, the Medicare-SSI fractions
published on June 24, 2009, could not possibly have been final since, as the PRRB concluded,
“[T]here is no evidence that those SSI percentages were ever used in calculating the Participants’
10 DSH adjustment for the year at issue.” J.A. at 3; see also Def. Cross-MSJ at 11–13. Considering
that the June 2009 Medicare-SSI fractions had already been updated in the months prior to
Plaintiffs’ appeal before the PRRB, the Court concurs that the challenged publication clearly was
not “the end result of a succession or process” and “not to be changed or reconsidered.” Final,
The American Heritage Dictionary of the English Language (3d ed. 1992) (published nine years
after “final determination of the Secretary” language introduced); see also Bennett v. Spear, 520
U.S. 154, 177–78 (1997) (final agency action “must mark the ‘consummation’ of the agency’s
decisionmaking process — it must not be of a merely tentative or interlocutory nature,” and it
must also be an action “by which rights or obligations have been determined, or from which
legal consequences will flow”) (internal quotation marks and citations omitted). Indeed, when
other courts in this district have found that jurisdiction was proper under § 1395oo(a)(1)(A)(ii),
they have noted that the secretarial determination at issue explicitly indicated that the payment
rate “cannot be revised.” Abbott-Nw. Hosp. v. Leavitt, 377 F. Supp. 2d 119, 127 (D.D.C. 2005).
Plaintiffs respond that this is too technical a definition of “final”; instead, they cast their
claim about the June 2009 Medicare-SSI fractions as a challenge to “the Secretary’s inclusion of
the Medicare Part C Days in the SSI fraction.” Pls. Reply at 9. In filing their appeal, Plaintiffs
told the PRRB that the common issue they sought to address was the “erroneous inclusion of
inpatient days attributable to Medicare Advantage [Medicare Part C] patients.” J.A. at 89. This,
they argue, constitutes a final determination about how to calculate the amount of payment that
providers receive since “none of [the subsequent CMS] changes cited by the Board changed the
decision of the Secretary to include Part C days in the calculation of the SSI fraction,” even if the
specific “cost reports for the Hospitals were subject to change in the DSH adjustment.” Pls. MSJ
11 at 19. Via this broader definition, Plaintiffs maintain that they in fact challenged a final
determination.
Defendant responds that this argument founders for several reasons. First, the
Government points out that whatever Plaintiffs now claim they were challenging, they told the
PRRB that “[t]he final determination being appealed is the publication of the FY 2007 SSI Rates
on June 24, 2009,” J.A. at 89; ECF No. 23 (Def. Reply) at 4, and they attached a “data file
containing SSI ratios . . . for more than three thousand hospitals” without any policy statement
regarding Medicare-Part-C days. See J.A. 87–88; Def. Reply at 4–5. This position, however,
arguably places too much weight on the exact determination challenged. The PRRB clearly
knew that what concerned the hospitals was the placement of Medicare-Part-C days into either
the Medicare-SSI fraction or the Medicaid fraction. See J.A. at 1 (“This appeal involves multiple
Providers’ appeals for the issue of the inclusion of Medicare Advantage [another name for Part
C] days in the calculation of the 2007 Supplemental Security Income (‘SSI’) Ratios.”). Although
Plaintiffs did not challenge a final rule or other policy-setting document focused exclusively on
the placement of Part C days, that alone is not enough to undermine their counterargument.
More compelling is the Government’s next rebuttal: it does not matter if Plaintiffs
specifically challenged the Medicare-Part-C days decision in the June 2009 publication because
an interim decision is not rendered final simply by the fact that it remains unchanged throughout
later revisions. Consider the case in which an agency issues a Notice of Proposed Rulemaking
and later issues a Final Rule. Even if many aspects of the rule stay the same between the
issuance of the NPR and the Final Rule — which presumably often occurs — that does not
transform the NPR into the appropriate vehicle to challenge those unchanged aspects. In re
Murray Energy Corp., 788 F.3d 330, 335 (D.C. Cir. 2015) (holding that while “EPA ha[d]
12 repeatedly and unequivocally asserted” it had certain legal authority including in memo and
preamble of proposed rule, “those EPA statements are not final agency action”). Finality still
requires that the action “mark the ‘consummation’ of the agency’s decisionmaking process” and
be an action “by which ‘rights or obligations have been determined.’” Bennett, 520 U.S. at 177–
78 (citations omitted). The June 2009 publication of the Medicare-SSI fractions did not meet
either of these requirements with respect to the decision on placement of Medicare-Part-C days
or even as to the values of the hospital-specific fractions themselves, which were later revised.
The June 2009 fractions were neither the first nor the last instance in which the Medicare-
Part-C policy was articulated, and it is not clear why Plaintiffs picked them as the basis for their
challenge. As Defendant notes, in the June publication, “CMS was simply applying the policy
that was in effect at the time as stated in the fiscal year 2005 IPPS final rule.” Def. Reply at 5;
see also 69 Fed. Reg. 48,916, 49,099 (Aug. 11, 2004) (“adopting a policy to include the patient
days for [Medicare-Part-C] beneficiaries in the Medicare fraction” and revising their regulations
accordingly); Pls. MSJ at 6–8 (discussing 2004 policy change and change in regulatory language
in August 2007 final rule). Regardless of when the policy was first announced, the June 2009
Medicare-SSI fractions were not a final decision as to Medicare-Part-C days under the plain
meaning of 42 U.S.C. § 1395oo(a)(1)(A)(ii), as they were not the end of CMS’s policymaking
process and subject to no further revision. The PRRB thus lacked jurisdiction over Plaintiffs’
appeal.
This determination is not undermined by two recent opinions of this Circuit that
addressed the inclusion of Medicare-Part-C days in the Medicare-SSI fraction, including through
a challenge to fractions published by CMS. See Allina Health Servs. v. Price (Allina II), 863
F.3d 937, 939–40 (D.C. Cir. 2017), aff’d sub nom. Azar v. Allina Health Servs., 139 S. Ct. 1804
13 (2019); Allina I, 746 F.3d 1102. In both cases, the plaintiffs originally appealed to the PRRB
under different theories of jurisdiction than that relied on here. See Allina Health Servs. v.
Sebelius, 904 F. Supp. 2d 75, 83 (D.D.C. 2012), aff’d in part, rev’d in part 746 F.3d 1102
(providers in Allina I appealed intermediary’s NPR calculation under 42 U.S.C.
§ 1395oo(a)(1)(A)(i), which allows for appeals of MAC’s decision as “to the amount of total
program reimbursement due the provider”); No. 14-1415, ECF No. 1, ¶¶ 38–39 (providers in
Allina II appealed to PRRB under 42 U.S.C. § 1395oo(a)(1)(B), which permits appeal if NPR
has not been filed within required timeframe). In Allina II, the PRRB then found that it had
jurisdiction over the matter but was “without authority to decide [the] particular question” and so
granted expedited judicial review. See 863 F.3d at 940–941 (internal citations and quotation
marks omitted). Similarly in Allina I, the PRRB granted expedited judicial review as it noted
that this was a situation where “it has jurisdiction but does not have the authority to decide a
question of law, regulation, or CMS ruling.” Allina Health Serv. v. Sebelius, No. 10-1463, ECF
No. 42-1 (Joint Appendix) at ECF p. 8.
The Court, consequently, concludes that the hospitals were not appealing a final
determination of the Secretary.
2. Amount of Payment There is a separate and independent basis for upholding the PRRB’s decision: the
challenged Medicare-SSI fractions were not a “determination of the Secretary as to the amount
of the payment” — the only category of secretarial determinations over which Congress gave the
PRRB jurisdiction. Recall that 42 U.S.C. § 1395oo(a)(1)(A)(ii) allows a case to be brought
before the PRRB if a provider “is dissatisfied with a final determination of the Secretary as to the
amount of the payment under subsection (b) or (d) of section 1395ww,” which includes the
disproportionate share reimbursement. Id. (emphasis added). In dismissing Plaintiffs’ appeal,
14 however, the PRRB noted that what was at issue was only “data for determining the
disproportionate share adjustment.’” J.A. at 3 (quoting Transmittal 1744, which updated the
June 2009 publication) (emphasis in original). That is not the same thing.
As Defendant explains, the publication of Medicare-SSI fractions, even if final, cannot be
a determination as to the amount of payment since the fractions “are but one component used to
calculate a hospital’s DSH adjustment.” Def. Cross-MSJ at 10. From just the Medicare-SSI
fraction it cannot even be determined whether “a hospital is entitled to any DSH adjustment, let
alone the amount of that DSH adjustment,” since a provider must first clear a threshold based on
the sum of its Medicare-SSI and Medicaid fractions to be eligible to receive the adjustment. Id.;
cf. Baystate Med. Ctr. v. Leavitt, 545 F. Supp. 2d 20, 57 (D.D.C. 2008), amended in part, 587 F.
Supp. 2d 37 (D.D.C. 2008) (suggesting, but not deciding, that inclusion of days that could
“deflate[] the SSI fraction” would affect the “amount of the payment”). As a result, the
determination as to whether a provider “is entitled to a DSH adjustment and, if so, how much . . .
it will be is made by the MAC ‘at the time of the year-end settlement of its cost report’” and after
the hospital has submitted the relevant data. See Def. Cross-MSJ at 12 (citing 51 Fed. Reg.
31,454, 31,458–59 (Sept. 3, 1986)).
Plaintiffs, however, counter that the Medicare-SSI fractions do affect the amount paid to
them because the fractions that CMS provides — and in turn whatever method CMS adopts to
determine those fractions — must be used in calculating their disproportionate patient
percentages, which in turn affects their reimbursement. See Pls. Reply at 2; see also Allina II,
863 F.3d at 943 (“Fiscal intermediaries are commanded to use HHS’s Medicare fractions in
calculating adjustment amounts.”). Indeed, if the amount of payment to Plaintiffs was not
substantial, there would likely be no case before this Court.
15 The difference between the parties boils down to a dispute about whether Plaintiffs have
conflated a determination by the Secretary about one of several undetermined elements that
eventually flows into the amount of payment and “a final determination of the Secretary as to the
amount of the payment.” 42 U.S.C. § 1395oo(a)(1)(A)(ii). A challenge to an element of
payment under 42 U.S.C. § 1395oo(a)(1)(A)(ii) is only appropriate if, as the D.C. Circuit has
explained, “the Secretary ha[s] firmly established ‘the only variable factor in the final
determination as to the amount of payment under § 1395ww(d).’” Monmouth Med. Ctr. v.
Thompson, 257 F.3d 807, 811 (D.C. Cir. 2001) (quoting Washington Hosp. Ctr. v. Bowen, 795
F.2d 139, 147 (D.C. Cir. 1986)) (emphasis added); see also Samaritan Health Serv. v. Sullivan,
1990 WL 33141 at *3 (9th Cir. 1990) (unpublished table decision) (“We have held that if the
Secretary’s classification of a hospital effectively fixes the hospital’s reimbursement rate, then
that decision is a ‘final determination’ as referred to 42 U.S.C. § 1395oo(a)(1)(A)(ii).”).
Here, Defendant posits that Plaintiffs should have waited until they received an NPR to
bring their case since “the NPR is the only relevant final DSH payment determination.” Def.
Cross-MSJ at 15. Plaintiffs counter that precedent from the Circuit courts makes clear that a
provider need not always wait for an NPR to appeal; otherwise, an appeal under
§ 1395oo(a)(A)(ii) would be coterminous with a challenge to “a final determination of the
[MAC] . . . as to the amount of total program reimbursement” brought after submitting a year-
end cost report under 42 U.S.C. § 1395oo(a)(A)(i). See Pls. Reply at 7.
It is true that these two types of appeal are not coterminous, and Plaintiffs correctly
identify several cases where providers brought cases under 42 U.S.C. § 1395oo(a)(A)(ii) and did
not have to wait for an NPR before appropriately challenging a final secretarial determination.
In those cases, however, jurisdiction was proper under § 1395oo(a)(A)(ii) because the secretarial
16 determination at issue was either the only determination on which payment depended or clearly
promulgated as a final rule. See Cape Cod Hospital v. Sebelius, 630 F.3d 203 (D.C. Cir. 2011);
Sunshine Health Sys., Inc. v. Bowen, 809 F.2d 1390 (9th Cir. 1987); Washington Hosp. Ctr., 795
F.2d 139. Although Plaintiffs also brought their challenge under § 1395oo(a)(A)(ii), the
circumstances that made jurisdiction proper under that subsection are not present here.
In Washington Hospital Center, for example, the D.C. Circuit explained that Congress
had clearly intended to create two distinct appeals processes — one under 42 U.S.C.
§ 1395oo(a)(A)(i) for challenges to a MAC’s determination of total program reimbursement and
one under 42 U.S.C. § 1395oo(a)(A)(ii) to challenge the amount of payment determined by the
Secretary under the at-the-time newly introduced Prospective Payment System for Medicare.
See 795 F.2d at 145. The two processes were not the same because under PPS, “payment
amounts are independent of current costs and can be determined with finality prior to the
beginning of the cost year[;] . . . [thus] the appeals provision applicable to PPS recipients cannot
be read to require hospitals to file cost reports and await NPRs prior to filing a PRRB appeal.”
Id. at 146. In other words, because the complete payment amounts could be finally determined
before hospitals submitted cost reports, the alternate basis for appeal, 42 U.S.C.
§ 1395oo(a)(A)(ii), was available.
Similarly, Sunshine Health Systems also dealt with whether a challenge was
appropriately brought to a final determination of the Secretary or whether additional cost
information was required when a hospital challenged a letter finding that it was a new hospital
for purposes of the PPS. The Ninth Circuit held that this was a final determination because, as a
new hospital, the payments it received under the relevant scheme “would be calculated solely on
the basis of the fixed standardized cost averages,” and additional information on the hospital’s
17 actual costs was not required. See 809 F.2d at 1396. Indeed, the “amount of the payment” in
§ 1395oo(a)(1)(A)(ii) is framed in terms of prospective payments hospitals are to receive —
which can be determined with finality in advance of payment — rather than, as here, data as to
the number of patient days a hospital actually accrued during a particular period. See
Washington Hosp. Ctr., 795 F.2d at 147 (amount of payment “is the sum of a [diagnosis-related
group] per-patient rate and a target amount per patient” in contrast to “total program
reimbursement . . . for the period covered by [the cost] report,” which is appealed under 42
U.S.C. §§ 1395oo(a)(1)(A)(i)); St. Francis Hosp. v. Bowen, 802 F.2d 697, 700–01 (4th Cir.
1986) (amount of payment defined in terms of rates and designed to give prospective
information).
Cape Cod Hospital, which Plaintiffs rely on as an example of a final secretarial
determination filed prior to a cost report, also presented distinct circumstances as the plaintiff
hospitals challenged two final rules promulgated by CMS that governed the wage indexes for
rural hospitals receiving Medicare payments. See 630 F.3d at 208. The fact that these rules were
the culmination of the notice-and-comment procedure already distinguishes them from the
fractions at issue here; in addition, the rules in Cape Cod Hospital were also appealed to the
Circuit under a different posture. There the PRRB found that “it lacked authority to resolve the
legal questions presented by the hospitals,” not that it lacked jurisdiction. Id. at 209.
There thus remain instances in which a provider can appropriately challenge “a final
determination of the Secretary as to the amount of the payment” under § 1395oo(a)(1)(A)(ii)
before it has received an NPR. Unfortunately for Plaintiffs, this is not such an instance. The
Medicare-SSI fraction is just one of the variables that determines whether hospitals receive a
18 DSH payment and, if so, for how much. The publication of these fractions for FY 2007 was not
a determination as to the amount of payment received.
B. Chevron Step Two
Even if the Secretary did not prevail at Chevron Step One, the Court would find him the
victor at Step Two. Put another way, even if the statute were found to be “silent or ambiguous
with respect to the specific issue” of what constitutes a “final determination of the Secretary as to
the amount of the payment” under 42 U.S.C. § 1395oo(a)(1)(A)(ii), the Court would still uphold
the PRRB’s decision as it is based on the Secretary’s reasonable interpretation of that section of
the statute. Chevron, 467 U.S. at 843. The Secretary has consistently found that disputes about
the receipt or amount of DHS payments can only be appealed after issuance of an NPR by a
MAC, which suggests that the component parts of a DSH payment such as the Medicare-SSI
fraction are not final secretarial determinations. This interpretation is laid out in the 1986
Inpatient Prospective Payment System final rule stating that “final determination of a hospital’s
eligibility for, and amount of, any disproportionate share adjustment will be made by the fiscal
intermediary at the time of the year-end settlement of its cost report.” 51 Fed. Reg. at 31,458.
This view was reiterated in 2015, after Plaintiffs filed their appeal. See 80 Fed. Reg. 70, 298, 70,
570 (Nov. 13, 2015) (“[T]he PPS payment adjustment for hospitals that serve a significantly
disproportionate share of low income patients is determined on the basis of information about
patients’ eligibility for Medicaid benefits and their entitlement to [SSI benefits;] . . . this
information is properly included in the hospital’s cost report for such period.”).
Here, the Secretary’s implicit determination that CMS’s publication of the Medicare-SSI
fractions could not be a “final determination . . . as to the amount of the payment” was
reasonable on the grounds previously described. Since the DHS adjustments are based at least in
19 part on the cost reports submitted by hospitals, it is reasonable for the Secretary to conclude that
challenges to those payments should occur only after an NPR has been issued or a final rule
governing the adjustment process is released. The Court must uphold any “reasonable
interpretation made by the administrator of an agency,” Chevron, 467 U.S. at 844; as a result,
even if had not found that the statute clearly addressed the issue at hand, the Court would still
affirm the PRRB’s jurisdictional decision as it is based on a reasonable interpretation by HHS of
the relevant section of the Medicare statute.
C. Other Issues
The Court briefly addresses the hospitals’ few remaining concerns.
1. Adequate Explanation of PRRB’s Decision
Although not expressly raised by Plaintiffs, Defendant asserts that the PRRB adequately
explained its decision to dismiss for lack of jurisdiction. See Def. Cross-MSJ at 20–23. The
Court concurs. The Board’s opinion lays out, albeit with relative concision, several reasons why
it concluded that the June 2009 publication of the Medicare-SSI fractions was not a “final
determination.” J.A. at 1–3. As discussed above, shortly after publishing these fractions, CMS
reversed course and instructed that they should not be used. Id. at 2. The Board also explained
that in addition to being non-final, Plaintiffs had challenged the publication of data used with
other information to calculate the amount of payment, but not the amount of payment itself. Id.
at 2–3. Based on the reasoning in the PRRB’s decision, the Court concludes that the Board has
“articulate[d] a satisfactory explanation” for its jurisdictional dismissal, State Farm, 463 U.S. at
43, as there is a “rational connection” between the facts found regarding the nature of the June
2009 Medicare-SSI fractions and the decision that the fractions did not constitute a final
determination of the Secretary. Id. There is also no indication, and Plaintiffs do not even argue,
20 that the PRRB ignored relevant arguments as to whether it had jurisdiction over Plaintiffs’ claims
or considered material that it should not have. Id.
2. PRRB’s Delay
Plaintiffs also contend that the PRRB’s delay stymied them from pursuing relief in other
ways. The hospitals were no doubt exceedingly frustrated by waiting eleven years for a
resolution of their appeal, only to have it sua sponte dismissed by the PRRB. The Board could
certainly have acted with greater alacrity, but no matter its pace, the PRRB was still obligated to
determine if it had jurisdiction and, if not, to “dismiss[] the appeal,” as it did here. See 42 C.F.R.
§ 405.1840(c)(2); id. at § 405.1840(a)(4). Plaintiffs argue that jurisdictional issues could have
been raised earlier — such as when the PRRB acknowledged receipt of the appeal in 2009, see
Pls. MSJ at 10; J.A. at 70–73 — and that they could have been allowed to brief the jurisdictional
issue prior to dismissal. See Pls. MSJ at 18. They also note that the MAC told the PRRB when
the case was initially filed that “no jurisdictional impediments exist for these providers.” Pls.
MSJ at 11 (quoting J.A. at 12). While the hospitals may feel sandbagged, the PRRB’s rules
explicitly state that “[a]n acknowledgement does not limit the Board’s authority. . . to dismiss the
appeal if it is later found to be jurisdictionally deficient.” CMS, PRRB Rule 9 (Aug. 29, 2018),
https://go.cms.gov/3vEW0LW. And the Board’s acknowledgement of receipt was purely
procedural and did not address the merits of the appeal. The Board, moreover, is allowed to
“review jurisdiction on its own motion at any time.” CMS, PRRB Rule 4.1 (Aug. 29, 2018),
https://go.cms.gov/3vEW0LW. There was thus nothing improper about its dismissing the
hospitals’ claims on its own motion, although it admittedly could have done so sooner.
The fact that the Board’s delay prevented Plaintiffs from pursuing an alternate appeal
under § 1395oo(a)(1)(A)(i) once they received their NPRs is also not a reason for this Court to
21 overturn the Board’s jurisdictional decision. As Plaintiffs explain, “The last NPR [relevant to
this case] was issued on November 29, 2012,” to Union Hospital, see Pls. MSJ at 13, from which
the hospital then had 180 days to appeal to the PRRB, creating a final deadline in May 2013. Id.
Plaintiffs did not appeal then, presumably because the PRRB appeal underlying this case was
pending and they thought it would be resolved relatively promptly. It is true that “[h]ad the
Board reached” its jurisdictional decision “in a more diligent matter, . . . Providers would not
have been prejudiced by the PRRB's delay,” since they “could have simply filed within 180
days” of issuance of their NPRs. Id. But nothing prevented them from doing so either by filing
a new case before the PRRB under § 1395oo(a)(1)(A)(i) or by amending their existing one while
their original case was pending. Nor do they “explain why they took no action to preserve their
appeal” during this time. See Def. Reply at 13. The Court thus cannot find that the PRRB’s
delay is a basis to hold the jurisdictional dismissal unlawful.
3. Alternative Avenue for Appeal by Memorial Hospital
Plaintiffs last posit that “[w]ith specific regard to Memorial Hospital, the Board’s
dismissal was [also] improper” because the PRRB separately had jurisdiction under 42 U.S.C.
§ 1395oo(a)(1)(B), which governs appeals from untimely filings of NPRs. See Pls. MSJ at 19.
Memorial maintains that jurisdiction exists under this subsection because it “filed its cost report
with the MAC on July 1, 2008,” but “did not receive an NPR or other determination on the cost
report before July 1, 2009,” as required by regulation. Id.; see also 42 C.F.R. § 405.1835(c)(1)
(NPR untimely if not filed within one year of final cost report). Since Memorial filed its appeal
before the PRRB on December 18, 2009, which was “within 180 days of” the deadline by which
it should have received its NPR from the MAC, it concludes that the PRRB had jurisdiction over
22 its appeal styled as a § 1395oo(a)(1)(B) claim. See Pls. MSJ at 19–20; 42 U.S.C. § 1395oo(a)(3)
(filing deadline for delayed-NPR appeals).
Defendant initially disputes whether Memorial actually filed its cost report in July 2008,
see Def. Cross-MSJ at 22, but the filing time is ultimately irrelevant because Memorial never
sought jurisdiction on the basis of an untimely NPR. Id. Rather, in filing its appeal, Memorial
stated that “[t]he final determination being appealed is the publication of the FY 2007 SSI Rates
on June 24, 2009.” J.A. 89. It made no reference to the delayed receipt of its NPR. Although
Memorial could likely have sought jurisdiction on this alternate basis, it nowhere indicated that it
was so doing, as was required by regulation. See 42 C.F.R. § 405.1837(c)(3) (in group appeal
providers must offer “[a] copy of each final contractor or Secretary determination under appeal,
and any other documentary evidence the providers consider to satisfy the hearing request
requirements . . . and a precise description of the one question of fact or interpretation of law,
regulations, or CMS Rulings that is common to the particular matter at issue in the group
appeal.”). It cannot now assert a post hoc alternative basis for jurisdiction.
IV. Conclusion
For the foregoing reasons, the Court will deny Plaintiffs’ Motion for Summary Judgment
and grant Defendant’s Cross-Motion for Summary Judgment. A separate Order will issue this
day.
/s/ James E. Boasberg JAMES E. BOASBERG United States District Judge
Date: March 25, 2022